RDOS proposal unfair tax policy (Conservation Fund)
The following letter was submitted to the Penticton Herald (link here). I had something to do with the structure of the tax to support the Conservation Fund so I feel I should respond to some of the points Mr. Llewellyn raises. My comments are bolded below.
Re: Regional District of Okanagan Similkameen’s proposed Bylaw No. 2690, 2016.
After spending 40 years dealing with property appraisal, assessment administration and tax policy issues the RDOS’s new tax on all of us is flawed. As a past president of the International Association of Assessing Officers, I strongly recommend every resident of the RDOS oppose the quiet introduction of this bylaw for the following reasons:
1. One letter to the editor recently stated $170,000 would be raised from Penticton. The actual amount is $230,717 and adds almost one per cent to Penticton’s property tax rate in 2017. Full disclosure is needed instead of saying it’s only $10-14 per parcel.
[Well, we can't control information in letters to the editor....]
Very little information is on the RDOS website about the Alternative Approval Process. Aren’t there are better ways to build public support and acceptance of new taxes?
[Links to all open Alternate Approval Processes (AAP) are available from the home page of the RDOS. See the circled area below:
The link takes you to the following page, which has information about the Conservation Fund bylaw and AAP.
a simple one-pager is here:
In general, this is a problem with AAPs: people think they are sneaky (I raised this issue on this site early in 2015 when we started talking about a conservation fund). The alternative is to have a referendum, which has many downsides including expense.
At some point taxpayers have to trust the people they elect to make decisions about complex issues. It is the whole point of representative government. An AAP is meant to be a backstop, not a full exercise in participatory decision making.]
2. With little public information and reporting taxes being capped at “the greater of $450,000, or, $0.0372 for every $1,000 in assessed value” there are professional reasons to oppose the tax.
Taxes can increase annually based on new construction and increases in market value. It is wrong, against best practices and good tax policy.
Using tax rates to drive taxation is not condoned by professional, internationally recognized property tax policy standards.
The world-leading International Association of Assessing Officers publishes the Standard on Property Tax Policy with best practices for ‘“rate driven” versus “budget driven” taxation systems. Taxing authorities that use rate driven systems are “... able to hide windfalls they may reap by arguing that they did not increase the rate of taxation. Rate-driven property tax systems fail to meet the test of open and visible property taxation.”
Good property tax policy relies on budget driven systems where tax rates increase or decrease with changes in assessed value due to new growth or fluctuations in market value.
[I think this misses the point of the Conservation Fund. I fully agree that taxes for services such as water systems and parks should be budget-driven: the local government should estimate what it will cost to provide the service and then charge taxpayers exactly that amount. Any surpluses or deficits are carried forward to the next year. This is precisely how the RDOS taxes for almost all services.
The Conservation Fund is different because it is a fund. We can't work backward from a budget because there is no budget. Instead, there are an infinite number of projects in the region to undertake. The critical question is thus: How much are people willing to pay for conservation? Based on our consultations and experience in other jurisdictions we guessed an average of $10/household/year is reasonable. We then take the ~$500K/year this raises over the region and apply it to the highest priority projects.
Note that the basis for taxation is the assessed value of land and improvements. Thus, a million dollar home on the lake will pay 10x more towards the Conservation Fund than a more modest home with an assessed value of $100K. The average may be $10 but the true value varies considerably from property to property. Hence the use of ranges in RDOS literature.]
3. This new tax is supposed to leverage funds and grants from other levels of government. The formula on how new funds will be used fairly and equitably has not been stated for any of the affected areas and there are at least three that won’t participate.
[We are hoping to attract matching funding for projects and note that conservation funds in other jurisdictions have had success in doing this. The potential sources of matching funding are (a) diverse and (b) never guaranteed. These sources include (of course) the federal and provincial governments but also charitable foundations and private donors. Much depends, of course, on the nature of the projects undertaken. It is not a question of fairness; it is a question of undertaking projects that get people excited and attract their support.]
I reviewed the working documents. Calculation details are stacked against municipalities by weighting non-residential assessments with factors in excess of 300 per cent. Putting professional standards, best practices and good policy aside is not good.
[A discussion of different taxation ratios in British Columbia can be found here: http://www.cscd.gov.bc.ca/lgd/library/revenue_source_review/An%20Analysis%20of%20Property%20Taxation.pdf
The general idea is that some property classes, such as businesses, pay a higher rate than residential whereas others, like farms, play a lower rate. Whether this makes sense or not is a matter of debate but the use of differential rates for tax classes is pretty much universal in the province. The rational for the business multiplier (often 2.45 x the residential rate) is that assessed value of land and improvements by itself under-represent both the business's value and its use of services. Or put differently, businesses benefit disproportionately from the services provided by local government and thus should pay more than residents.
Does this rationale make sense in the context of the Conservation Fund? Hard to say. Much of the rationale for conservation is that it makes the region more attractive to new residents and tourists. So the multiplier makes sense to the extent that conservation leads to increased demand and increased demand leads to more profitable businesses. Obviously, it is hard to prove this convincingly.]
The right thing to do is abandon the bylaw, rethink it and then do it right the first time.
[I would say we have done it right.
The real issue is whether you want to spend (on average) $10/household/year on a fund for undertaking conservation projects. If not, you need to submit an AAP objection (and make sure your like-minded friends do the same). If you support the Conservation Fund you may want to promote it to your friends and convince naysayers that it is a good idea.
The Okanagan members of the RDOS have, after careful consideration, chosen to support the initiative. Osoyoos is currently contemplating its own conservation fund; however, I believe they will be brought into the larger fold eventually. After all, the Osoyoos area has the most to gain from regional investments in conservation.]